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Close Your Loan
The Loan Closing
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Closing your loan is the final step in home ownership or home borrowing. This is
where you sign the final documents, pay you're closing costs and the mortgage funds
are disbursed. If you are purchasing a home, closing is the actual transfer of ownership
of the property (ownership is officially transferred to you at the time of closing
or, in some states, it is the date of the recording of the deed).
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If you are refinancing or getting a home equity loan, closing is the disbursement
of funds to get your new mortgage (there is a 3 business day right of rescission,
required under the Federal Truth and Lending Act, before these funds can be disbursed
to establish the new loan).
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Escrow, Closing Agents and Attorneys
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Your loan is scheduled for closing at the date and time specified in the purchase
agreement or at a mutually agreed upon time. The closing package is prepared and
sent to the escrow, closing agent or attorney for settlement. They assure that all
fees and other closing payments are accurately documented. Also, an escrow account
for the payment of insurance and real estate taxes is established (unless waived
by you the borrower for a fee).
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What to Expect
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To ensure a successful loan closing, it is important that you know what to expect,
from your actual closing costs to the final documents required to be signed.
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Closing Costs: Closing costs are the fees associated with completing your
home purchase or borrowing for a new mortgage. Our interactive Estimated Closing Costs calculator can help you understand the
various costs charged in the state where the property is located. (Note: this calculator
is for informational purposes only and is not a Good Faith Estimate or a HUD-1 Settlement
Statement).
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There are two types of closing costs:
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Recurring costs, which include property tax, insurance and interest.
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2.
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Non-recurring costs, which are only assessed at the time of closing and include
lender and broker fees, title fees and recording fees.
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When you signed your mortgage application at the beginning of the process, you should
have received a Good Faith Estimate  detailing your estimated closing costs. At closing,
you will receive a statement with your actual closing costs. This
document is called a HUD-1 Settlement Statement
and it establishes the total funds you must bring to closing. You'll need to obtain
a certified or cashier's check for this amount. Personal checks usually aren't accepted.
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We recommend that you bring the Good Faith Estimate to closing with you to see where
the cost differences are. This will go along way to understanding any changes from
the estimate to the actual costs. Also, it allows you to ask the right questions
and catch possible mistakes.
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Final Closing Documents: There are four primary documents you will receive
when you close you loan:
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HUD-1 Settlement Statement. This document provides the final total for your closing
costs.
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Truth-in-Lending Disclosure. The document shows the costs of your loan and discloses
the annual percentage rate (APR), finance charges, the amount being financed, your
monthly payment amount and the number of payments required.
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Deed of Trust or Mortgage. A mortgage creates a lien on the property, which serves
as a lender's security for the loan. A lien is recorded as a public record and ownership
cannot be transferred until the lien is satisfied. A mortgage is placed as a security
against the title, however, you still have full title to the property and ownership
rights. A mortgage grants the lender the right to sell the property to recover the
outstanding debt if you fail to pay the loan.
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A deed of trust is a special kind of deed that is recorded as a public record creating
a lien on your property. A deed of trust involves three parties. You are the trustor,
the lender is the beneficiary, and a third party is the trustee, someone who holds
temporary (but not full) title until the lien is paid. Trustees' are usually attorneys
or title insurance companies.
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The only difference between a mortgage and a deed of trust is when foreclosure is
an issue. The trustee has the power to sell the home if your loan becomes delinquent,
rather than the mortgage lender. The lender must give the trustee proof of the delinquency
and ask the trustee to initiate foreclosure proceedings.
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The Mortgage Note. This document states that you, as the borrower, recognize you
must repay your loan. This promissory note holds the specific terms of the loan
including the interest rate, the length of the loan, and the penalties and steps
the creditor can to take to have the loan repaid if you become delinquent on your
payments.
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